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The Pamphlet Collection of Sir Robert Stout: Volume 70

Movements of Capital and Customs' Returns

Movements of Capital and Customs' Returns.

In the old countries of Europe it is impossible to trace the movements of capital by a mere examination of the returns of imports and exports. The complexities of business are so great, the stocks, shares, debentures and other securities passing from country to country, and between Europe and America, represent such vast sums, that whether capital is flowing in or out of a given country in any year is most difficult to determine. These confusions do not exist to any important extent in Australia, and consequently, our returns of imports and exports are a much simpler study.

The returns of British commerce always show an enormous excess of imports; the returns of Australian commerce generally also show an excess of imports; but the cause in one case is of a reverse character to the cause in the other case. The British excess of imports represents profits on capital lent or invested page 6 abroad; the Australian represents more capital flowing in and increasing the public indebtedness. It is often thought that the big Australian imports means the same thing—that is profit—as the big British imports mean. But the truth is very different. A study of the facts we shall put forward will show in a very marked manner the exhilarating effect of the millions of British capital which have been thrown into Australia from time to time, they will also show the necessity that exists for the moat extreme care in building up prosperity on borrowed capital. We propose to refer at some length to the comparative arrival3 and influence of new capital on the three eastern colonies of Australia, viz., Victoria, New South Wales and Queensland, but before doing so it will serve a useful purpose to examine the case of New Zealand, If a colony owes an aggregate sum which entails a yearly charge of three millions sterling for interest, then, supposing that no new capital were coming out, whatever the exports were, value to the extent of three millions would go to pay interest, and the balance only would be available to pay for imports. If, while having to pay three millions for interest, British investors lent three millions, then the one three millions would balance the other three millions, and money would be available to the full extent of the exports to buy imports. If, while having to pay three millions for interest, British investors lent six millions of new capital, then the whole value of tie exports, and a further three millions would be available to buy imports. Taking an imaginary sum, say twenty millions, as toe value of the exports, the three positions referred to would come out in the Customs returns as follow:—
Exports. Imports. Excess.
£ £ £
(1) 20,000,000 17,000,000 3,000,000 exports
(2) 20,000,000 20,000,000
(3) 20,000,000 23,000,000 3,000,000 imports

While, in actual fact, in the first case the colony exactly pays her way with the outside world, in the second case (though the figures are equal) it increases its indebtedness by three millions, and in the third case (though the excess of imports is only three millions) it yet increases its indebtedness to the extent of six millions. We should bear such facts in mind if we would learn the truth as to the financial position between a colony and the outside world.

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All statements as to the aggregate indebtedness of the whole or of any one of these colonies are only estimates. While we can measure the volume of what we have called the "borrowing stream," we cannot, except in a very approximate manner, measure the volume of what we have called the "speculative stream." Hence it is difficult to say what new capital has been obtained by any of these colonies in a given year; the Customs returns do, however, give a fairly clear idea of the amount of new capital actually imported. If the imports exceed the exports by three millions, it is tolerably safe to affirm that new capital to the extent of three millions has come into the colony, while a further supply sufficient to balance the year's interest charges has also been obtained.